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Credit Constraints and Growth in a Global Economy

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  • Coeurdacier, Nicolas
  • Guibaud, Stéphane
  • Jin, Keyu

Abstract

In a period of rapid integration and accelerated growth in emerging markets, three striking trends have been (1) a divergence in the private saving rates of emerging markets and advanced economies, (2) large net capital outflows from emerging markets, and (3) a sustained decline in the world interest rate. This paper shows that in a multi-period OLG model, the interaction between growth and household credit constraints --- more severe in emerging markets --- is able to account for all of the above facts. We provide micro-level evidence that corroborates our mechanism: saving behaviors across age groups in the U.S. and China are broadly supportive of the predictions of the model.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9109.

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Date of creation: Aug 2012
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Handle: RePEc:cpr:ceprdp:9109

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Keywords: capital flows; credit constraints; Globalization; life-cycle household savings; saving and current account imbalances;

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Cited by:
  1. David Backus & Thomas Cooley & Espen Henriksen, 2013. "Demography and Low Frequency Capital Flows," NBER Working Papers 19465, National Bureau of Economic Research, Inc.
  2. Gourinchas, Pierre-Olivier & Rey, Hélène, 2013. "External Adjustment, Global Imbalances and Valuation Effects," CEPR Discussion Papers 9566, C.E.P.R. Discussion Papers.
  3. Bussière, Matthieu & Kalantzis, Yannick & Lafarguette, Romain & Sicular, Terry, 2013. "Understanding household savings in China: the role of the housing market and borrowing constraints," MPRA Paper 44611, University Library of Munich, Germany.
  4. Yi Wen, 2011. "Making sense of China’s astronomical foreign reserves," Working Papers 2011-018, Federal Reserve Bank of St. Louis.

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